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Set the Max with Liverpool Victoria

Liverpool Victoria – Max

Type: Unitised with-profits endowment

Aim: Growth by investing in the Liverpool Victoria with-profits fund

Minimum sum assured/premium: £4,500/£50 a month, £600 a year

Minimum-maximum term: 10 years

Fund links: With-profits

Charges: Initial charge version – initial subject to negotiation, annual
implicit. Level charge version – annual 0.32%

Options: Waiver of premium

Commission: Initial 130% of Lautro, renewal 2.5%

Tel: 0845 6020690

Broker Panel: –

Neil Franklin – Partner, Franklins Financial Services

Brian Pack – Principal, Brian Pack Financial Services

Roy Rutter – Principal, Aptitude Financial Services

Terry Stevens – Proprietor, Centre Financial Services

Broker Ratings: –

Reputation in market: 7.5

Flexibility: 4.6

Investment choice: 4.3

Options: 4.6

Past performance: 7.9

Charges: 3.9

Product literature: 5.5

Liverpool Victoria has introduced Max, a 10-year unitised with-profits
endowment savings plan.

Looking at how the plan fits into the market, Franklin says: “I have no
idea what market this is aimed at and nothing in the literature of
supporting material gives an indication. If there is a market for
10-year savings plans then it has shrunk and is about to disappear.

“With Isa, unit trust and investment trust savings plans which are
lower charged, more tax efficient, more flexible and more controllable
there is a risk that this type of product could lead to a misselling
claim.”

Pack says: “It looks old fashioned and very restricted compared with
Isas etc.”

Rutter says: “There are still a few clients who find the with-profits
concept reassuring. However, this plan may be bracketed, in many
peoples&#39 minds, with endowment mortgages which will make the
going tough for Liverpool Victoria.”

Stevens says: “There are cheaper and more tax-efficient products
available. The Max must be regarded as a niche product. It is difficult
to see why it has been launched at all.”

Identifying the type of client that the plan is suitable for, Rutter says:
“Clients looking at a regular savings plan for a future commitment,
such as school fees.”

Stevens says: “Higher rate tax payers wanting a tax free lump sum in
10 years time or longer. – provided that they have exhausted all other
tax efficient methods of investing.”

Franklin agrees that the client should exhaust all other tax efficient
methods of investing before looking at the Max plan.

Pack thinks it would be suitable for the older type of client who still
believes in with-profits and has used up their Isa allowance.

Most of the panel agrees that the Liverpool Victoria Max will not
provide any new marketing opportunities. Rutter suggests that it
could be useful for school fees planning and retirement planning. He
says: “Clients looking for a longer term savings plan to supplement
Isa and Pep investments and clients supplementing their friendly
society savings plan above the tax free limit.”

Analysing the main useful features and strong points of the product,
Stevens lists the extendable 10 year term on each policy anniversary
and early full or partial encashment. He says: “Watch out for tax
charges and possible market value reduction on early encashment.
There is no market value reduction on maturity which is good.”

In addition, Rutter points out the modest level of life and terminal
illness cover included, the two charging options, reassurance that the
price of units cannot go down, the option to pay annual contributions
and the tax advantage of being a qualifying policy.

Discussing the range of additional options available on the plan,
Stevens says: “Life cover is required to maintain the tax treatment.
Waiver of premium is useful, but why bother with terminal illness
cover.”

Rutter says: “The facility to extend the term part way through could
prove a useful option to some clients, given how peoples&#39
circumstances can change. It is interesting to see a life of another
option.”

Franklin and Pack think the options are standard within the qualifying
policy limitations.

Pack thinks the plan&#39s disadvantages are that its old fashioned and
that the market value reduction may be a problem. He says: “The
policy has many restrictions which will turn most people off when
compared with Isas.” Stevens says: “There is no mention of a tax free
income facility on maturity.”

Rutter, Franklin and Stevens point to the charges as being a
drawback, Rutter says: “The charges are, on the face of it, slightly
high. I would of expected a lesser entry level – say £30 a month.”

Turning to Liverpool Victoria&#39s reputation, Franklin thinks it is sound.
Stevens says: “Generally good, mutuality may appeal to some
investors.”

Rutter says: “Excellent, particularly in the with-profits arena. The
name is, for a friendly society, quite well known among the public. It
has more recently shown its commitment to the IFA sector and its
service levels are good.”

Pack says: “Liverpool Victoria have a very strong reputation and are
well known.”

Commenting on Liverpool Victoria&#39s past performance record,
Stevens says: “Their two unit trust funds, growth and income, both
have poor performance over their two year lives. With-profits
performance can be found in with-profits surveys and the results are
very good. There is no financial strengths rating from Standard &
Poors, but its highly rated by Cazelet and AKG.”

Pack thinks Liverpool Victoria has a very good and very safe past
performance record. Rutter says: “Strong and consistent in
with-profits.” Franklin says: “Excellent – but so what we are not buying
the past.”

The panel agrees that Isas will provided the main competition to the
plan. The companies they highlight as providing competition are
Scottish Widows, Scottish Friendly, Flemings and Invesco.

Franklin thinks the charges are not fair and reasonable. Stevens
thinks it would be wise to quote both versions every time as the
charges for the initial charge version depends on the size of the
premium.

Pack says: “Both the level charge and the initial charge versions are
very uncompetitive together with the £2 monthly charge which is
reviewable and bad news.”

Rutter feels that the allocation rates on the level charge version are a
shade uncompetitive. He says: “I would have expected a lower
monthly plan fee.”

Stevens and Rutter think the commission is fair and reasonable.
Rutter says: “The range of choices on Liverpool Victoria products is
very useful.”

Examining the product literature, Packs says: “It is easy to read but
lacks the detail of critical illness cover.”

Rutter thinks that it is noticeably pro-IFA but the appearance is bland
and something more about Liverpool Victoria could have been
included.

Franklin says: “Boring but soothing. The application forms could do
with some simplification of design, they could use different colours to
identify different points.” Stevens thinks it is business like.

Summing up Franklin says: “With-profits is fatally damaged and
launching or repackaging seems a waste of money. IFAs should
avoid all of these types of products because financial planning has
moved on.”

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